Monthly Archives: March 2010

REDUNDANCY DUE TO OUTSOURCING/ABOLITION OF POSITION (LABOR CASE DIGEST No. 2)

Manifesting its disappointing behavior again, at least from the employees’ point of view, the Supreme Court of the Philippines upheld another decision of lower appellate courts as regards the controversial “management prerogative”. In SMART Communications, Inc. vs. Regina M. Astorga, with G.R. No. 148132, the high court ruled that Regina Astorga, a former District Sales Manager of the Corporate Sales Marketing Group/Fixed Services Division (CSMG/FSD) of Smart Communications, Inc. (SMART), was validly terminated due to redundancy, which is an authorized cause for the dismissal of an employee.

Background

Grievance, Mediation, Arbitration and Appeals

Regina was employed by Smart Communications, Inc. (SMART) as District Sales Manager of the Corporate Sales Marketing Group/ Fixed Services Division (CSMG/FSD) on May 8, 1997.

SMART launched an organizational realignment to achieve more efficient operations. Part of the reorganization was the outsourcing of the marketing and sales force. Thus, SMART entered into a joint venture agreement with NTT of Japan, and formed SMART-NTT Multimedia, Incorporated (SNMI). Since SNMI was formed to do the sales and marketing work, SMART abolished the CSMG/FSD, Regina’s division.

To soften the blow of the realignment, SNMI agreed to absorb the CSMG personnel who garnered the highest ratings and who were favorably recommended to SNMI. Regina landed last in the performance evaluation, thus, she was not recommended by SMART. SMART, nonetheless, offered her a supervisory position in the Customer Care Department, but she refused the offer because the position carried lower salary rank and rate. Despite the abolition of her division, she continued reporting for work until SMART issued a memorandum March 3, 1998 advising Regina of the termination of her employment on ground of redundancy.

Regina filed a complaint for illegal dismissal contending that SMART cannot lawfully contract out services which will displace the employees, especially if the contractor is an in-house agency. She claimed that abolishing CSMG, thereby terminating her employment, was illegal because it violated her right to security of tenure. SMART responded that Regina was validly dismissed by reason of redundancy, an authorized cause for termination of employment under Article 283 of the Labor Code. The redundancy of Regina’s position was the result of the abolition of CSMG and the creation of a specialized and more technically equipped SNMI, which is a valid and legitimate exercise of “management prerogative.”

LABOR ARBITER”S DECISION:

The Labor Arbiter (LA) declared Regina’s dismissal illegal. While recognizing SMART’s right to abolish any of its departments, the Labor Arbiter held that such right should be exercised in good faith and for causes beyond its control. The Arbiter found the abolition of CSMG done neither in good faith nor for causes beyond the control of SMART, but a ploy to terminate Regina’s employment. The Arbiter also ruled that contracting out the functions performed by Regina to an in-house agency like SNMI was illegal, citing Section 7(e), Rule VIII-A of the Rules Implementing the Labor Code. Accordingly, the Labor Arbiter ordered Regina’s reinstatement to her former position, without loss of seniority rights and other privileges, with full backwages, inclusive of all allowances and other benefits from the time of her dismissal to the date of reinstatement.

NLRC DECISION:

SMART appealed the unfavorable ruling of the LA in the illegal dismissal case to the National Labor Relations Commission (NLRC). The NLRC reversed the LA decision and sustained Regina’s dismissal. The NLRC declared the abolition of CSMG and the creation of SNMI to do the sales and marketing services for SMART a valid organizational action, i.e. a management prerogative. It also declared that contracting, subcontracting and streamlining of operations for the purpose of increasing efficiency are allowed under the law. The NLRC further found erroneous the Labor Arbiter’s disquisition that redundancy to be valid must be impelled by economic reasons, and upheld the redundancy measures undertaken by SMART. Regina appealed but her action was denied by the NLRC on December 21, 1999.

COURT OF APPEALS DECISION:

Regina then appealed the NLRC decision to the Court of Appeals via certiorari. The CA affirmed the NLRC resolutions that SMART’s reorganization resulting in the abolition of CSMG was a legitimate exercise of “management prerogative.” It rejected Regina’s posturing that her non-absorption into SNMI was tainted with bad faith. However, the CA found that SMART failed to comply with the mandatory one-month notice prior to the intended termination and is thus obliged to pay the petitioner an equivalent of her one-month salary.

SUPREME COURT RULING:

Regina was validly terminated due to redundancy, an authorized cause for the dismissal of an employee. The characterization of an employee’s services as superfluous or no longer necessary and, therefore, properly terminable, is an exercise of business judgment on the part of the employer. The wisdom and soundness of such characterization or decision is not subject to discretionary review provided, of course, that a violation of law or arbitrary or malicious action is not shown.

An employer is not precluded from adopting a new policy conducive to a more economical and effective management even if it is not experiencing economic reverses. Neither does the law require that the employer should suffer financial losses before he can terminate the services of the employee on the ground of redundancy.

The organizational realignment introduced by SMART, which culminated in the abolition of CSMG/FSD and termination of Regina’s employment was an honest effort to make SMART’s sales and marketing departments more efficient and competitive.

“It is the prerogative of the employer to adopt such measures as will promote greater efficiency, reduce overhead costs and enhance prospects of economic gains, albeit always within the framework of existing laws. Accordingly, we sustain the reorganization and redundancy program undertaken by SMART.”

However, SMART failed to comply with the one-month notice prior to termination. The record is clear that Regina received the notice of termination only on March 16, 1998 or less than a month prior to its effectivity on April 3, 1998. Likewise, the Department of Labor and Employment was notified of the redundancy program only on March 6, 1998.

SMART’s assertion that Regina cannot complain of lack of notice because the organizational realignment was made known to all the employees as early as February 1998 fails to sway. Regina’s actual knowledge of the reorganization cannot replace the formal and written notice required by the law. Notwithstanding her knowledge of the reorganization, she remained uncertain about the status of her employment until SMART gave her formal notice of termination.

The SC also ruled that it is proper to increase the amount of the penalty on SMART to P50,000.00. However, the award of backwages to Regina by the CA should be deleted for lack of basis. Backwages is a relief given to an illegally dismissed employee. Since her dismissal is for an authorized cause, Regina is not entitled to backwages. The CA’s award of backwages is totally inconsistent with its finding of valid dismissal.

COMMENT:

Based on existing laws and prior decisions such as in DAP vs. CA and Jaka Food Processing Corporation v. Pacot, the SC decided on yet another landmark decision as regards the so-called “management prerogative” largely in favor of an employer. In SMART Communications, Inc. vs. Regina M. Astorga, the employer’s “management prerogatives” is reemphasized as another reason, or perhaps excuse, for firing employees. Although, it is clear that, as provided for by Article 283 of the Labor Code, closure of establishment and reduction of personnel is allowed to the extent that the employer may terminate the employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking, by serving a written notice on the workers and the Department of Labor and Employment at least one (1) month before the intended date thereof, SMART cannot automatically terminate employees after any means directed to satisfy its profit motive. While such prerogatives must be exercised in good faith and in accordance with law and jurisprudence, in effect, large companies, corporations and other business establishments may have the tendency to terminate employment contracts in direct disregard of the security of tenure clause of Art. XIII, Sec. 3 of the Philippine Constitution by issuing memoranda and notices that do not serve as the equivalent of formal notice of termination. The decision has shown that an employee, such as Regina, may lawfully lose his employment even if he/she is not at fault.

The SC ruling is another reflection of SC’s tendency to back up government schemes of establishing an investment-friendly climate in the Philippines. Despite the fact that the SC categorically denies allegations that it bypasses the executive and legislative branches of the government by instituting an investment-friendly jurisprudence, it is somewhat clear that the Labor movement in the Philippines can expect more and more SC decisions that incline towards investors and businessmen. Although the high court is not considered institutionally as a policy-making body of the government, jurisprudence and matters arising from the decisions of the Supreme Court translate to the creation of alternative, if not new, economic policies. The SC seems to tread the economic road to the detriment of workers’ rights.

March of women, march for freedom

No matter how blazing the heat of the sun could be, the International Women’s Day celebrations last March 8 was a resounding success. Chanting hymns and cheers of freedom, hundreds of activists, mostly women, gathered and marched from Welcome Rotonda to the historic Mendiola, where a program was held to commemorate the day when women were supposedly given a chance to be liberated.

Leading the march was the Alliance of Progressive Labor-Women (APL-Women) together with the Martsa ng Kababaihan coalition, the local counterpart of the World March of Women, a global networking of feminist and other grassroots organizations.

Coinciding with the IWD is the World March’s global campaign this year called the Third International Action, which include opposing the “privatization of nature and public services,” militarism, workplace discriminations, and all forms of violence against women (VAW).

Adopting that themes in the Philippines, the Martsa ng Kababaihan likewise called for fighting sexism, especially the discrimination based on gender or against women; the neoliberal trade policies of the World Trade Organization (WTO) that benefit only the corporate elites; the militarism that pervades the country and strangles the citizenry; and the corrupt and despotic regime of Gloria Macapagal-Arroyo.

March 8 is indeed a cause for celebration for bringing the rights and experiences of women throughout the world out into the open. Cared for yet oppressed, dignified yet “commodified,” respected yet burdened: these contradictions represent the situation of women in society, whether from memories of a distant past or from the realities of the present. The twin problems of “violence” and “poverty” continue to exist to the detriment of women. Inside the family and in the society, violence against women is still rampant, and the many laws created to address the plight of every woman have remained largely not enforced. Thus, organized Filipino women must persevere on organizing and expanding their ranks to ensure the establishment of a genuine gender-fair society.

Prior to the IWD celebrations, a women’s electoral forum sponsored by LEARN and APL was held March 1 at the LEARN Workers’ House, which was participated in by 54 women activists from several APL member organizations as well as from other sister groups.

Highlighted here was the need for women to push for “women’s agenda” that must be supported and implemented by local and national candidates for them to gain the vote and cooperation of women’s organizations and their allies, particularly APL-Women.

Other issues discussed were the procedures and problems in the Comelec’s first automated voting, the LEARN and APL’s continued backing of the Akbayan party list, and their endorsement of the senatorial bid of Akbayan Rep. Risa Hontiveros.

SUSPENSION DUE TO UNION LEAVE WITHOUT PRIOR APPROVAL (LABOR CASE DIGEST NO. 1)

In a recent decision, the Supreme Court of the Philippines denied a petition for certiorari filed by Malayan Employees Association-Federation of Free Workers (MEA-FFW) and its member Rodolfo Mangalino for lack of merit and procedural shortcomings, specifically its late filing that rendered the CA decision final. The said petition aims to set aside the June 26, 2007 decision and the November 29, 2007 resolution of the Court of Appeals (CA) in CA-G.R. SP No. 80691, ruling that the suspension imposed by the respondent Malayan Insurance Company, Inc. on union member Mangalino is valid. Mangalino was suspended for taking a union leave without the prior authorization of his department head and despite a previous disapproval of the requested leave.

Background:

Grievance, Mediation, Arbitration and Appeals
A collective bargaining agreement (CBA) between MEA-FFW and the company was adopted by the representatives of both parties. A provision in this CBA allows union officials to avail of union leaves with pay for a total of “ninety-man” days per year for the purpose of attending to union activities.

Thereafter, the company issued a rule in November 2002 requiring not only the “prior notice” that the CBA explicitly requires, but “prior approval” by the department head before the union and its members can avail of union leaves. The rule took effect in November 2002 without any objection from the union until a union officer, Mangalino, filed union leave applications in January and February, 2004. His department head disapproved the applications because the department was undermanned at that time.

In spite of the disapproval, Mangalino proceeded to take the union leave. He said he believed in good faith that he had complied with the existing company practice and with the procedure set forth in the CBA. The company responded by suspending him for one week and, after that, for a month, for his second offense in February 2004.

The union considered the suspensions as a grievance issue and after going through the grievance procedure in vain, including the referral of the matter to the company’s president, Yvonne Yuchengco, the union went to the National Conciliation and Mediation Board for preventive mediation. When this option also failed, the issue of the legality of the suspensions was presented to a Panel of Voluntary Arbitrators on the following issues: 1) whether or not Mangalino’s suspensions were valid; and 2) whether or not Mangalino should be paid backwages for the duration of the suspensions.

On November 26, 2004, the Voluntary Arbitrators came up with a non-unanimous decision. They stated that the suspension of Mr. Rodolfo Mangalino’s on the first availment of union leave was invalid while the second suspension was valid but illicit in terms of penalty of thirty (30) days suspension. Thus, the supposedly thirty seven (37) days suspension period was reduced to ten (10) days only. Henceforth, the Complainant was entitled to twenty seven (27) days backwages.

The company appealed the decision to the CA on May 12, 2005 through a petition for review under Rule 43 of the Rules of Court. In a decision promulgated on June 26, 2007, the CA granted the company’s petition and upheld the validity of Mangalino’s suspension on the basis of the company’s “management prerogative” to prescribe reasonable rules to regulate the use of union leaves.
The union moved for the reconsideration of the CA decision and received the CA’s denial (through its resolution of November 29, 2007) on December 8, 2007.

Supreme Court Ruling

After reviewing all the company’s comments, the union’s reply, memoranda and other premises regarding the petition, the Supreme Court decided to take it up as a petition for review on certiorari under Rule 45 instead of a petition for certiorari under Rule 65 of the Rules of Civil Procedure. Because of the delay in the filing of the said petition, the CA decision had lapsed to finality by the time the petition was filed. Furthermore, in Malayan Employees Association-FFW vs. Malayan Insurance Co., Inc., with G.R. No.181357, the highest appellate court’s 2nd Division composed of ponente Associate Justice Arturo D. Brion, Associate Justices (Chairperson) Antonio T. Carpio, Renato C. Corona, Presbitero J. Velasco, Jr. and Jose P. Perez, concluded.

While it is true that the union and its members have been granted union leave privileges under the CBA, the grant cannot be considered separately from the other provisions of the CBA, particularly the provision on management prerogatives where the CBA reserved for the company the full and complete authority in managing and running its business. We see nothing in the wordings of the union leave provision that removes from the company the right to prescribe reasonable rules and regulations to govern the manner of availing of union leaves, particularly the prerogative to require prior approval. Precisely, “prior notice” is expressly required under the CBA so that the company can appropriately respond to the request for leave. In this sense, the rule requiring “prior approval” only made express what is implied in the terms of the CBA…

The union accepted this regulation without objection since its promulgation (or more than a year before the present dispute arose), and the rule on its face is not unreasonable, oppressive, nor violative of CBA terms. Ample evidence exists in the records indicating the union’s acquiescence to the rule. Notably, no letter from the union complaining about the unilateral change in policy or any request for a meeting to discuss this policy appears on record…

The “prior approval” policy [of the company] fully supported the validity of the suspensions the company imposed on Mangalino. We point out additionally that as an employee, Mangalino had the clear obligation to comply with the management disapproval of his requested leave while at the same time registering his objection to the company regulation and action. That he still went on leave, in open disregard of his superior’s orders, rendered Mangalino open to the charge of insubordination, separately from his absence without official leave. This charge, of course, can no longer prosper even if laid today, given the lapse of time that has since transpired… (emphasis added)

Comment on the SC Ruling

From the given facts, the CBA only requires “prior notice” of availment of the 90-day union leave. Then, the company issued a memorandum “regulating” the availment of union leave by requiring “prior approval” of applications for the said availment. In its comment on the union’s petition, it even defended the new rule by saying that the regulation of the use of union leaves is within the company’s management prerogative, and the company was simply exercising this prerogative when it required its employees to first obtain the approval of either the department head or the human resource manager before making use of any union leave. This raises the question: Can the management unilaterally amend the CBA? Article 253 of the Labor Code states that the CBA cannot be modified during its lifetime, even by mutual agreement. The CBA can only be modified or amended with respect to the 4th and 5th years thereof or after the 5-year term has expired. Sad to say, the SC based the validity of the suspension on the company’s memorandum, which in turn the SC validated because of the union’s acquiescence thereto.

It would have been correct for the SC to declare the suspension invalid because the memorandum is void for being violative of the law which prohibits any modification of the CBA without justifiable reasons. Instead of saying that Mangalino exposed himself to charges of AWOL and insubordination, the SC should have declared the company guilty of unfair labor practice for suspending him on account of his union activities.

The lesson we learned from this decision, is for union officers to be vigilant with trade union rights set forth in the CBA. By not protesting the company’s memorandum, by remaining silent, which silence means consent, the exercise of a right to avail of union leave became a just cause for suspension or even dismissal for AWOL as the SC opined.
We disagree with the SC’s ruling that the issuance of the memorandum regulating union leave availments is a valid exercise of the company’s management prerogative. It is not management’s prerogative to amend the CBA to make it difficult for union members to avail of union leave. It is not management’s prerogative to violate the CBA. Management prerogatives end where the rights of workers begin.